A small business needs money to grow and develop. The process of obtaining the necessary capital is often a tedious one, especially if you don’t know what type of loan is best for you. Lines of credit and personal loans are two types of small-business financing options that may seem similar at first glance but have subtle nuances that make them different.
In this blog post, we will discuss both personal loans and lines of credit in detail so that you can decide which suits your business best!
What is Personal Loan?
A personal loan, also called unsecured lending or borrowing, is a small-business financing option where an individual borrows money from a bank and pays it back with interest. The term ‘personal’ means the lender doesn’t require any collateral to approve the loan since they rely on your ability to repay them for their risk. The personal loans approval process can take from a few days to a week.
What are Lines of Credit?
A line of credit is a flexible loan from a bank or other financial institution. It offers a defined amount of money to access as needed and repay either immediately or over time. Interest is charged on the line only when it gets used, so if you never touch it, then no interest will accrue! Lines of credit are most often used to cover gaps in irregular monthly income or finance projects where the costs cannot be predicted upfront. Versa Business Systems offers flexible financing to small businesses in Georgia and nationwide in the US.
The Difference Between the Two
The following are some of the differences between a personal loan and lines of credit.
- Personal Loans have stricter qualifications and are for small business owners who need more money.
- Personal loans’ repayment terms include fixed monthly payments over a specified duration.
- Line of credit can be used (up to the approved limit) as needed without any application process after the initial approval.
- A personal line of credit acts like an overdraft protection from your bank account.
Lines of Credit vs. Personal Loans: Which One Should You Choose?
Both options have their advantages and disadvantages, so it’s always important to discuss these issues before you make a decision. Lines of credits offer more flexibility because unused amounts may roll over from month to month. However, this is not the case with personal loans because financial institutions charge interest fees over all unpaid balances.
Versa Business Systems, one of the leading lending companies in Georgia, offers multiple financing options to small businesses. You can consult our experts to discuss what type of loan suits you better; our experts will suggest a loan depending on your financial earnings and business potential. Whether you’re interested in a personal loan or a line of credit, you can apply for funding with us without any fees.